Crude Oil & Precious Metal prices fall over ‘Grexit’
London (Feb 22) Crude oil and metal prices drifted lower last week as markets took their cue from supply and demand patterns as well as uncertainty over Greece’s eurozone future.
Eurogroup head Jeroen Dijsselbloem was working overtime on Friday to save a make-or-break meeting on Greece’s demand to ease its bailout programme as Germany insisted it stick with its austerity commitments.
“Thinking about the impact on commodities, the initial turmoil caused by ‘Grexit’ would surely boost safe-haven demand for gold while undermining the prices of assets perceived to be riskier, including oil and industrial metals,” Capital Economics research group said in a note to clients.
Oil
Prices slipped as news of record-high US crude stockpiles offset weak Libyan supplies.
Traders sold off crude on Wednesday on forecasts of a huge jump in US inventories. They extended the losses on Thursday after the Energy Information Administration confirmed a weekly surge in US commercial crude stockpiles to levels not seen since records began in 1982.
Tony Nunan, risk manager at Japanese trading house Mitsubishi Corp, said that although the increase was above market expectations, “the gain was a lot smaller than the number announced on Wednesday by the (private) American Petroleum Institute in its weekly report.”
He added: “Traders are watching when the gap between oil production and (demand) will narrow.”
Phil Flynn of Price Futures Group said that largely offline supply in Libya was also supporting oil prices. Infighting and sabotage in Libya has reduced output to 150,000 barrels a day, down from a high of almost 1.5 million barrels per day, he said.
“Risk premium in oil may start to come back and the glut of oil may tighten faster than many people think,” he noted.
By Friday on London’s Intercontinental Exchange, Brent North Sea crude for delivery in April fell to $60.69 a barrel from $61.19 a week earlier.
On the New York Mercantile Exchange, West Texas Intermediate or light sweet crude for March dropped to $51.16 a barrel from $52.70.
Precious metals
Gold fell over the week despite winning support from the Greek situation and minutes from the Federal Reserve’s January meeting that portrayed a central bank more dovish on interest rates than thought, traders said.
By Friday on the London Bullion Market, the price of gold dropped to $1,208.25 an ounce from $1,235.50 a week earlier. Silver slipped to $16.34 an ounce from $16.80. On the London Platinum and Palladium Market, platinum decreased to $1,166 an ounce from $1,201. Palladium dipped to $783 from $786 an ounce.
Base metals
Base or industrial metal prices mostly retreated in quiet trade owing to the Lunar New Year, while Greece weighed also.
“The market will be keen to gauge the mood in which Chinese participants return to work later this month,” said analysts at Unicredit.
“The other big issue is Greece. The market perception is that the possibility of a Greek exit from the eurozone has been brought much closer by recent events and if this outcome materialises, it has the potential to cause chaos across financial markets. Risk appetite has been sapped.”
Source: khaleejTimes
